Taking advantage of third party logistics providers' services

Sudibyo M. Wiradji, Contributor, Jakarta

Warehousing can not be separated from the operation of a manufacturing company. This is why many industrial estates have provided warehousing facilities for their tenants.

In addition to inhouse warehouse facilities provided by an industrial estate, tenants or other companies operating outside the estate could also benefit from professionals to manage their distribution and supply activities.

Major warehouse providers generally use more advanced technology in their warehouse management such as through the implementation of the Internet enabled warehouse management system (WMS). The use of advanced technology such as Barcoding, ASRS (Automatic Store and Retrieval System), Cross-docking, Warehouse Management System, Vendor Managed Inventory and Efficient Consumer Response (ECR) are also on the increase.

Several warehouse service providers such as RPX warehouse, DHL-run warehouse, TNT-run warehouse and PT ABX Logistics Indonesia-run warehouse are already familiar with the WMS system and several others are on the way. RPX Warehouse handles warehouse services for Federal Express (FedEx).

"We are currently implementing a warehouse management system which is fully Internet enabled. This will enable our staff and our customers to view and transact in the system anywhere with Internet access," said PT ABX Logistics Indonesia's General Manager Saut Simanjuntak.

DHL's Commercial Technical Advisor John Benshop said that DHL is constantly researching and enhancing the use of information technology (IT) in warehousing management.

There are many aspects included in warehousing from simple storage to complex inventory control and supply chain management. This can include a "Virtual Warehouse" system which enables users to access stock levels and complete orders from anywhere in the world even to rerouting shipments.

RPX Group's CEO Hasha E. Joesoep said that efforts are now underway to provide RPX Warehouse with modern material-handling equipments including shelving, pallet racking, work benches, warehouse accessories and electronic/diesel forklift, storage system (racking and shelving) and the supporting IT system (WMS)

Indonesia's warehouse providers that have adopted WMS remain small or about 30 percent. But the awareness of the need to adopt it has grown.

The warehousing management activities include the receipt of goods, quality checks on goods, storage of goods in a suitable environment, inventory counts, retrieval and consolidation for customer orders and labeling and repacking for transporting.

Security is also a major concern for the warehouse providers. "We are responsible for the safe storage and delivery of our clients' goods. We provide a dedicated secure area and access control along with 24-hour, 7-day-a-week physical security and closed circuit TV," John Benshop said.

Saut said that PT ABX Logistics Indonesia placed inventory accuracy as its utmost priority. "We are fully accountable for the goods we store for our customers and we will do our best to ensure safe-keeping. A good warehouse management system is also required so that goods can be located quickly and inventory reports provided to the customers promptly if required," he added.

For TNT, the main aspects in managing warehouse are accuracy, speed, cost-effectiveness and reliability. "With high accuracy of records and documentation, TNT can improve the speed of orders and avoid stock obsolesence.

"In every process of order fulfillment, from receiving, put- away, picking to dispatch, the speed will shorten the time to convert orders into cash, which, in turn, will improve a company's cash flow. Sometimes high speed means high cost and to minimize cost, every process of order fulfillment must be lean and minimize non-value added activities. And, last but not least, all must be consistent or reliable," said TNT's Marketing Service Manager Safitri Dmayanti.

Currently, TNT manages 110,000 square meters of warehouse space with 200 trucks moving out per day.

In the past decade, almost all multinational companies have taken advantage of using the warehouse service provided by logistics providers or commonly known as 'Third Party Logistics Provider' (3rd PLP) when they are engaged in production, import and export activities. Dozens of logistics providers can be found in the Tanjung Priok sea port in Central Jakarta, Tanjung Priok in East Java and the Soekarno Hatta Airport in North Jakarta.

Producers or manufacturers spend up to 3.5 percent of the total value of products on warehouse services.

Before being transported to distribution points like hypermarkets, supermarkets, shops or traditional shops locally known as warung, the finished products should first be stored in a warehouse, depending on the nature of the products. For goods that easily decay like food or medicine, they should be stored in a refrigerated warehouse with cool temperature or a cold storage.

Only advanced industries have equipped themselves with their own warehouse. For cost considerations, many companies outsource their warehousing activities to professional companies.

According to Hasha E. Joesoep, services provided by professional warehouses operators include inventory control and management, order fulfillment and processing, packaging and crating services and integrated logistics call center as a single contact point.